Electric car maker Tesla Motors needs to "smash" the U.S. electrical grid to justify trading at its currently soaring prices, CNBC's Jim Cramer said Thursday.
"The people that are buying these stocks, just know you are playing with fire," Cramer said on "Squawk on the Street." "I totally understand. Everyone likes to make money overnight. Just understand you're playing with fire."
Tesla shares hit an all-time high Wednesday, the day the carmaker announced plans to raise $1.6 billion in convertible bonds to help fund construction of a "Gigafactory" in one of four states, part of a $4 billion to $5 billion project to revamp its lithium-ion battery production. The company wants to have the factory operational by 2020, when it could produce 500,000 cars. Cramer called that number "eye-opening," but said the company's current share prices are based on "hope."
(Read more: Tesla to Texas: How do you like us now?)
Also this week, Consumer Reports' annual auto issue ranked Tesla's Model S its top overall pick.
(Read more: Tesla soars, Ford falls in Consumer Reports study)
Investment in Tesla translates into belief that its founder, Elon Musk, can "smash the electronic grid" with his battery technology, Cramer said, adding that he would not buy into that option.